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Facebook adds value optimization to ad bidding & Lookalike Audiences

By some estimates, upwards of 85 cents of every new dollar spent on digital ads today is going to Google or Facebook.

That’s not just a result of the fact that both companies have massive audiences, but also a result of the fact that both companies continue to offer marketers more and more options for targeting those audiences.

This week, Facebook announced two new tools that marketers advertising on the world’s largest social network will want to take a look at: value optimization and value-based Lookalike Audiences.

Both rely on the Facebook Pixel and are designed to help marketers reach Facebook users who are likely to spend more money with them.

As Facebook explained in its announcement:

Value optimization works by using the purchase values sent from the Facebook pixel to estimate how much a person may spend with your business over a seven-day period. The ad’s bid is then automatically adjusted based on this estimation, allowing campaigns to deliver ads to people likely to spend more with your business at a low cost.

Value optimization is somewhat similar to Google’s Target CPA bidding, which allows advertisers using AdWords automated bidding to let Google’s technology work on their behalf to minimize their cost per acquisition (CPA). To use Target CPA bidding, marketers must use Google’s conversion tracking.

Value-based Lookalike Audiences

Facebook is also extending its value optimization algorithms to Lookalike Audiences, one of the most powerful tools Facebook offers marketers.

Lookalike Audiences allow marketers using Custom Audiences to target Facebook users that Facebook determines are similar to their Custom Audiences. The performance delivered by Lookalike Audience targeting can be impressive. For example, according to Facebook, one ecommerce marketer realized a 56% lower CPA and 94% lower cost per checkout using Lookalike Audiences.

Unfortunately, working with Custom and Lookalike Audiences is not always efficient. More sophisticated marketers, realizing that not all of their users or customers are as valuable as others, frequently segment their customers into multiple Custom Audiences. For obvious reasons, this can be a tedious task.

Now, that step can be eliminated in some cases as Facebook is giving marketers the ability to create value-based Lookalike Audiences so they don’t have to perform this segmentation on their own. Facebook explained:

With this enhancement, advertisers are no longer limited to creating small groups of audiences based on their spend or LTV prior to creating a Custom Audience. Now, they can include a value column to their entire customer list, which Facebook can use to create an additional weighted signal for people most likely to make a purchase after seeing your ad.

Worth experimenting with?

For marketers that have already implemented the Facebook Pixel on their properties, value optimization and value-based Lookalike Audiences are potentially significant offerings that many marketers will probably find worthwhile to experiment with.

However, Facebook’s methodology for estimating how much customers might spend with a business over a short period of time is a black box, something that some marketers might be a little wary of given Facebook’s recent string of metrics faux pas. Despite this, offering marketers tools for identifying and targeting their most valuable users is a no-brainer for Facebook and it’s all but certain the company will continue to add similar offerings well into the future.

We’re in the land of startups this week, spending a day in the life of Ann-Marie Rossiter, Head of Marketing at events marketplace HeadBox. As usual, we’ll be finding out what it takes to succeed in this role, from skills and tools to the daily routine. If you’d like to appear in this feature, get […]